2024 PLANADVISER Retirement Plan Adviser of the Year

Jim Detterick,
Morgan Stanley Graystone Consulting

FINALIST

Business at a Glance as of 12/31/23

Location: New York, New York
How many plan assets do you have under advisement? $27.8B
What is your median plan size (in assets)? $109.4M
How many plans do you have under administration? 66 plans
How many participants in total do you serve? 256,306 participants
Parent firm: Graystone Consulting at Morgan Stanley

PLANADVISER: Tell us about your practice and how you got into advising retirement plans.

Detterick: We run a large, dynamic financial advisory team that includes over 55 financial professionals. Many of the team’s professionals are focused on our corporate relationships, where we aim to serve financial needs for both plan sponsors and their employees (plan participants). When we started our business over 25 years ago, we focused myopically on 401(k) plans. Over time, and as our clients’ needs grew or we won new client mandates, we expanded across the defined contribution spectrum and now consult to 403(b), 401(a) and 457 plans. We also help plan sponsors implement and maintain nonqualified deferred compensation plans (top hat, SERPs, deferred compensation plans), defined benefit plans (traditional annuity and cash balance), equity compensation plans (RSU, PSU, SOP, etc.) and financial wellness programs across all these different plan types to engage the participant in a comprehensive fashion.

Today, our team primarily focuses on the large market space as most of our corporate clients are Fortune 1,000-level companies with individual plan assets above $250 million. Furthermore, our corporate client base is quite diverse, spanning almost every industry or sector. For example, we serve alternative asset managers, law firms, for-profit healthcare organizations, retail companies, energy companies, lodging and leisure organizations and government / municipal entities.

Candidly, I did not enter the fiduciary investment consulting space on purpose. Like most college graduates, I was unaware that this space existed upon receiving my diploma. My goal upon graduation and entering the workforce was to be retained by a highly reputable organization where I could learn, grow, and ultimately find what I wanted to do for the rest of my life.

As luck would have it, one of the mega-financial services firms offered me a job and I was hired to work in the call center of their growing and thriving retirement plan recordkeeping business. My superiors quickly recognized my thirst for knowledge and drive to succeed. In recognition, I was awarded several promotions and the opportunity to experience different aspects of the business. Through these experiences, I developed a very deep interest in the executive compensation and benefit plan space. However, as an undergraduate English major, I realized my understanding of investments and finance left something to be desired, so I decided to go back to school to obtain my master’s in business administration. I attended classes on nights and weekends while maintaining full-time employment at my original employer.

In those early years, I recognized that I felt the highest levels of self-fulfillment while working directly with plan sponsors and helping to enhance or solve their compensation and benefit offerings. I felt immense self-gratification when a plan sponsor listened to my counsel and implemented my advice. It was at this time I decided to deepen my career by moving to the advisory side of the firm to become a retirement plan-focused adviser.

Roughly a decade later, I left my first employer after being recruited to what is now Graystone Consulting at Morgan Stanley (at the time it was the institutional consulting business within Smith Barney). I resisted the recruiting calls for several years, but ultimately made the transition after my current firm hesitated to acknowledge fiduciary status for its advisory business in the mid 2000’s while Graystone’s predecessor had been acknowledging fiduciary status for decades. In addition to acknowledging fiduciary status, I concluded Morgan Stanley’s ongoing commitment to the corporate retirement space to be abundant and unwavering.

For the past seventeen years, I have worked to grow my practice and can proudly state that I lead one of the largest teams at Morgan Stanley (by way of assets under management, size of retirement plan consulting practice and employee headcount) and run the firm’s largest ERISA-focused retirement practice. Additionally, I co-chair the internal Graystone Advisory Board and my voice and opinions help shape Graystone Consulting’s future strategic priorities and endeavors in the corporate retirement business.

PLANADVISER: Are you connected to a wealth management division? If so, please explain how you work for them and your goals for coordination. If not, please explain whether you plan to be in the future, or not, and why.

Detterick: Graystone Consulting is the fiduciary institutional investment consulting business of Morgan Stanley. Our parent company, Morgan Stanley, is a global financial services firm that provides investment solutions to a wide range of clients, including institutions, governments, and individuals. One of Morgan Stanley’s key business segments is a wealth management division, which provides investment advisory, brokerage and other services to institutions and individual investors. So yes, in short, we are connected to a wealth management division and we think it adds meaningful value to our clients.

Our team, Global Institutional Advisory Solutions, follows a two-pronged business model, delivering solutions to institutions on their retirement plans as well as providing (when requested by the institutional client): communications, education and advice solutions to their participants. This unique combination allows us to deliver a holistic experience for the institutions we service by providing advice on the corporate level, as well as offering solutions for their employees. We think participant education and advice is a critical component of the services institutional consultants should deliver, especially with the responsibility of saving for retirement landing evermore on the shoulders of employees.

Backed by one of the largest financial institutions in the world, we can leverage all the tools available at Morgan Stanley, which are vast when it comes to financial planning resources for individuals. Coupling these tools with our in-depth knowledge of the benefits their employers offer, we can assist participants in creating a comprehensive financial plan and feel confident in their retirement journey.

Our comprehensive services provide access to tailored education and financial planning for employees to align to their individual needs, which can help them reach their specific retirement and financial goals, now and in the future. We can provide support for broad-based goals, such as having sufficient retirement income, to complex goals like legacy and estate planning, philanthropic initiatives and more. This advice can be delivered through multiple channels, from broad education seminars to one-on-one white glove consultations. This multi-channel, high-tech meets high-touch approach makes it easy for employees of all learning styles to engage and get started, wherever they are on their journey.

PLANADVISER: What challenges do you think the retirement plan industry faces and what role do you have in addressing and confronting those challenges?

Detterick: The retirement plan industry is ever evolving, and as such so are the challenges facing plan sponsors and their participants.

We believe the biggest challenge facing the retirement industry is getting participants to take a more proactive role in planning for their retirement. We find that the average participant rarely makes investment or deferral changes; in fact, most participants only log into their accounts on the recordkeeper website once or twice a year. When they do, they simply check the balance and log off. Participant-level inertia is troubling, and the retirement industry has unfortunately been unable to come up with a one-size-fits-all “silver bullet” strategy that can increase participant engagement meaningfully and reliably.

While we do not profess to have the singular solution to this problem, we remain very active with our plan sponsor clients in combating participant inertia. We do this in several ways, including:

Working with our clients and their recordkeeping partners to craft participant communications that encourage participants to take a more active approach to managing their retirement plan account(s).
Recommending plan design features such as automatic enrollment and automatic escalation which ensure that participants are maximizing their level of savings even if they choose to continue to take a hands-off approach.
Hosting financial wellness seminars where members of our team will make on-site visits to preferred plan sponsor locations to answer basic financial and retirement questions in a group setting or on a one-on-one basis.

While we believe participant inertia is the most challenging dilemma facing the retirement plan industry, we recognize there are other challenges, secondary in nature, the industry must contend with. These challenges include:

The regulatory environment is often complex and difficult to navigate. For example, the DOL’s rules around ESG investment strategies and their potential inclusion in defined contribution plan lineups have changed several times over the course of the last few presidential administrations. This “flip-flopping” makes it difficult for plan advisers to properly advise and plan sponsors to act in accordance with the rules and regulations.
Another example of the overly complex regulatory environment was the passage of the original Setting Every Community Up for Retirement Enhancement Act and the SECURE 2.0 Act of 2022. Both pieces of legislation were extremely nuanced and all-encompassing. In fact, SECURE 2.0 contained a multitude of provisions which required additional regulatory clarity before recordkeepers could work towards practical implementation. Our team tries to stay abreast of these changes and works tirelessly with our plan sponsor clients to ensure that the appropriate decisions are made in the proper timeframe to ensure compliance with any new rules or requirements.
Participant litigation is another challenge facing retirement plans, particularly defined contribution plans. Our team realizes the best defense against participant litigation is to ensure that our clients always offer a very competitive, low-cost retirement plan – encompassing investments, recordkeeping, consulting, and other services. By always thinking about the participant, we can not only improve retirement outcomes, but we can also take steps to mitigate the chances of potential litigation, a benefit to all who are involved.
Finally, the retirement plan industry has always struggled to help participants understand the likely or potential monthly income that can be derived from their defined contribution balance in retirement. The first SECURE Act mandated that recordkeepers begin to provide participants with a “lifetime income” illustration on their account statements. The goal of this illustration is to shift the participant’s mindset from the accumulation stage of their retirement journey to the decumulation stage. Rather than being forced to think solely in terms of their total account balance at retirement, participants were shown an estimate of the monthly income the balance would generate (similar to the monthly income provided by an annuity). Unfortunately, the mandated calculation has some shortcomings. It does not assume additional retirement plan contributions, nor does it assume any growth in assets based on the participant’s current and future asset allocation. Therefore, it is likely that the estimate on participant statements grossly underestimates one’s annuitized potential. While our team cannot control these calculations, we have worked tirelessly with each of our clients to ensure they understood the intent of this calculation. Additionally, our team has attempted to raise participant awareness of what this figure represents during participant seminars and one-on-one meetings.

PLANADVISER: Why do you feel it is important to work individually with plan participants?

Detterick: In a survey of over 1,000 full-time employees of mid- to large-sized U.S. companies, conducted with the support of Morgan Stanley, three out of four participants responded that financial stress distracts them at work. Over half of those surveyed whose households earn more than $100,000 annually noted that their finances cause them stress. Our survey noted that participants are in most need of help with building wealth, planning for their families’ financial futures, building emergency savings, choosing and monitoring investments, managing bills and spending, improving credit and managing debt. Forty-nine percent of participants surveyed would like the ability to speak with a subject matter expert when making decisions.

These pain points require individual attention from a financial professional, with advice and insights tailored to the needs of each specific participant. A participant’s financial picture is not a snapshot in time but a journey towards their personalized goals and objectives. Plan sponsors recognition of participant’s financial stress has resulted in more involvement by our team in either formal financial wellness engagement or in ad-hoc financial education and retirement savings participant meetings. Through these meetings, we have been able to help place many of our clients’ employees on a more secure and sound path toward retirement.

One example of our dedication to the participant is the work we do with a fire and rescue municipal organization in Colorado, where we provide personalized financial planning services for over 800 participants. Not only do we lead group meetings and events, but we also conduct one-on-one meetings and run full financial plans for hundreds of employees per year. The financial plans not only consider retirement, but also consider simple budgeting strategies, saving for children’s college tuition, weddings, and other big-ticket purchases or events. Having a clear and concise financial plan in place has eased the daily financial stress of so many of this client’s employees.

This type of programming not only benefits participants, it also benefits our plan sponsor clients. Over 60% of surveyed participants noted that they would be more likely to stay at a job which provides them with a useful financial wellness program. Retaining a competitive workforce is undoubtedly key to long-term organizational success.

PLANADVISER: What are three of the biggest challenges that plan participants face today? How are you helping to address them?

Detterick: 1) One of the biggest challenges todays’ corporate retirement savers face is having, in most cases, sole responsibility to create their annual “income” in their retirement / non-working years. Over the last twenty to thirty years, the shift from defined benefit plans to defined contribution plans has really exacerbated this issue. Said differently, the burden of retirement planning has shifted from the employer to the employee. Most corporate employers have either exited or are in the process of exiting the traditional annuity defined benefit plan space. The responsibility of maintaining a traditional defined benefit plan has a perception of being too costly and risky for the employer, especially with today’s volatile markets.

2) Rising inflation has been a top-of-mind challenge following the pandemic shutdown. Concurrently, wage growth has not kept up with the increased costs of living. These factors have caused many participants to reduce their contributions to their employer-sponsored retirement plan. Even worse, we see more participants today dipping into their retirement plans through a plan loan or even a hardship to pay for daily living expenses. Removing retirement savings to pay for current living expenses will reduce the probability of achieving a successful retirement.

3) Building wealth and accumulating retirement assets is just the start. Asset decumulation, while always a challenge, has been pushed to the forefront of the retirement plan industry with the passing of the first SECURE Act. No matter how much is saved, it is critical to plan for, or at least understand, the type of monthly income one’s savings will generate in retirement. Key factors to take into consideration when planning for a resilient retirement income stream include:

Longevity – Life expectancy has increased for men and women. Outliving your retirement income has become a greater risk.
Volatility – Market swings and “Black Swan” events such as the coronavirus pandemic are always a possibility.
Inflation – Even relatively low rates of inflation can have a harmful effect on your purchasing power over time. Higher inflation can be especially onerous to retirees because they may have fixed income that can’t support rising costs.
Taxation – Converting retirement assets to retirement income can create a noticeable tax impact.

For all three challenges, the logical result is that it is imperative for consultants and their plan sponsor clients to educate and encourage employees to take full responsibility for their retirement journey. Understanding the importance of putting together a plan on saving for retirement can encourage participation in defined contribution plans.

Recognizing the possible penalties, tax implications, and reduced principal growth can assist in deterring participants from early retirement account withdrawals. Identifying potential solutions for asset decumulation, such as unique variable annuity products with lower fees, may offer protection and confidence in retirement. All these solutions start with educating and assisting participants on an individual level through their unique retirement journeys. By having a team composed of institutional experts who have been recognized nationally as a top corporate plan consultant / adviser, as well as access to top financial advisers who hold several designations, including CFPs, we are able to execute this philosophy and provide best-in-class service to our institutional clients and their plan participants.

A great recent example involves the third challenge mentioned above. There has been a race within the defined contribution industry to create a variable annuity product that looks to offer participants monthly income but at institutional pricing. We see this with BlackRock Inc., State Street Corporation, Fidelity Investments, etc., all of whom have begun to come to market with unique solutions. With our team composition, and the backing of all the tools offered by Morgan Stanley, we can appropriately evaluate all of these products. Furthermore, we can discuss the products with plan sponsors that have expressed interest in offering such products to their participants, as well as discuss with individual participants about how the product may fit in their unique situation.